Exchange-traded funds (ETFs)

  • ETFs are Index Funds
  • An ETF is a basket of stocks that reflects the composition of an Index, like S&P CNX Nifty or BSE Sensex.
  • They are listed and traded on exchanges like stocks.
  • They enable investors to gain broad exposure to entire stock markets in different Countries and specific sectors with relative ease, on a real-time basis and at a lower cost than many other forms of investing.
  • ETFs trading value is based on the net asset value of the underlying stocks that it represents
  • They are similar to mutual funds in a certain manner but are more liquid as they can be sold quickly on stock exchanges like shares.
  • Their price changes daily as they are traded throughout day.
  • ETF route is considered as safer mode of investment as it shields investors against stock market volatility.
Why in news?
  • Finance Ministry has launched Bharat 22, an ETF. Bharat 22¬†comprise of 22 stocks including those of central public sector enterprises (CPSEs), public sector banks (PSBs) and its holdings under the Specified¬†Undertaking of Unit Trust of India (SUUTI).
  • Second tranche of Bharat 22 ETF was oversubscribed 2.57 times.

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